Pepsi got an upgrade by Citigroup analyst Wendy Nicholson to buy from neutral, as she anticipated wider profit margins at the drinks-and-snacks giant.
Nicholson raised her share-price target to $169 -- a Wall Street high, according to Bloomberg -- from $148.
Improving operating margins could boost Pepsi shares, Nicholson wrote in a commentary cited by Bloomberg. The stock’s multiple should “expand considerably from current levels,” she said
Pepsi’s beverage business has lagged behind food during the Covid pandemic.
"We cover three companies with really sizeable market capitalizations: PEP at $190 bn, KO at $217 bn and PG at $353 bn. While each company is significantly different from the others in terms of what they sell, they are each massive global enterprises with dominant market share positions in their categories. Herein, we compare the underlying financial trends of the three businesses. Bottom line: PEP has had the most consistent organic sales growth of the three companies. And, while it has by far the lowest operating margin (largely owing to structural issues as a result of its business mix), we also think PEP likely has the largest amount of potential to expand its operating margins in coming years," analysts wrote.
Jim Cramer explains why he thinks the company is a buy in the video above.
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